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The Algorithm Behind Jim Simons's Success
- earnesti 2y agoWasn't he also a chain smoker?
- nbar 2y agoYes, but he tested for likelihood of lung cancer through gene screening. Odds we favourable so he kept smoking.
- cinntaile 2y agoI can't tell if you're joking or not but that's an interesting approach for sure. I'm surprised gene screening was accurate enough to do that 20-40 years ago?
- earnesti 2y agoLOL. I think he was an idiot, in that regards. Similarities to Steve Jobs, who resorted to quackery with his cancer. People can be geniuses and dumbasses at the same time.
- sk11001 2y agoI don't see the quackery, man liked smoking so he kept smoking. I think you're assuming some stronger claim about smoking or genetics which nobody has made.
- jodrellblank 2y agoWhat about giving cancer to others by secondary smoke inhalation, what about tongue cancer and mouth cancer and gum disease and cardio-vascular problems and breathing difficulties and eventual COPD and all the negatives of smoking that aren’t lung cancer?
- anonu 2y agoHe was. But it's irrelevant question on the topic of his success.
- lupire 2y agoIs it? Being on a constant drip of nootropic nicotine might be an important factor
- jandrewrogers 2y agoYes, famously so. I don't think I've ever met anyone that smoked as much as he did.
- DeathArrow 2y agoAssembling a team and keep working on something for 10 years when you are unsure whether it will work or not, requires a huge amount of passion, dedication and patience. I think most people would quit early if they don't see a rapid pay off.
- lencastre 2y agoBe humble, work with smart people, don’t give up too quickly, appreciate that luck plays a factor. Simmons, Charlie, and surely others have said that, maybe did that as well, and… got lucky.
- Lio 2y ago“I did a lot of math, I made a lot of money,” he reflected on his life, “and I gave almost all of it away.2 That's the story of my life.” And what a life it was. - This has got to be the dream hasn’t it. Making money not because you want a gaudy gold bathroom in a New York or London flat but because you can and because it’s fun to do.
- Galanwe 2y agoYeah, well, that's the kind of thing you say once you have so much money that effectively "giving most of it away" won't quite change your quality of life.
- david-gpu 2y agoI would rather have good health and healthy relationships with the people around me. Money is a distraction from what is important in life.
- sk11001 2y agoAnd if you ever have to choose between the two, you can choose what you value more. But I disagree with the premise that they're mutually exclusive. For the most part your career and financial success is orthogonal to your personal relationships, and to your health.
- david-gpu 2y ago> For the most part your career and financial success is orthogonal to your personal relationships, and to your health Every goal takes time to achieve. The time spent seeking a career and financial success is not spent on your relationships and your health. Ask me how I know.
- codetrotter 2y ago> Ask me how I know. How do you know?
- lordnacho 2y agoGreat book about his that is mentioned in the article, well worth reading. I read it and recognized a lot of interesting things in the evolution of his thinking, in terms of strategies. I think most of what they do will be recognizable to someone in the business. In the end though, it's not about the specific strategies. If I steal the recipe of a Michelin chef, I will still not be able to make a sufflé, since I don't have the prerequisite skills. I might be able to give it to someone who does, and maybe he will make something similar to the original, but even this person would not be able to follow the evolution of the original chef into making new, innovative dishes. In the end it seems that this highly technically proficient guy actually succeeded in building something as nebulous as a winning culture.
- richrichie 2y ago> In the end though, it's not about the specific strategies. If I steal the recipe of a Michelin chef, I will still not be able to make a sufflé, since I don't have the prerequisite skills. This is a great point. But even the pre-requisite skills should not matter in this case (you could always higher 100's of math/physics phDs?). The key element of RenTec's success is execution and it was mentioned in passing in the book by the WSJ reporter. RenTec does not need a super duper algorithm that predicts with 80 or 90% accuracy. A 2% edge is sufficient, provided they can place tens thousands of bets that are less correlated, day in day out. Then they are guaranteed to make a ton of money over the year by the law of large numbers. The ability to find and execute trades in that scale is a key part of RenTec a success.
- lupire 2y agoA 0.1% edge is sufficient.
- maximinus_thrax 2y agoWhich book exactly? "The Man Who Solved The Market"?
- lordnacho 2y ago
- jexp 2y agoRenTec was covered in much depth at the Acquired podcast. Basically algorithms from signal processing applied to huge volumes of historical and current data to determine buy and sell signals. Originally developed for national defense. Very secretive all external partners were bought out. Only hundred or so people benefited in the billions per person. Including Robert Mercer of Trump campaign financing and Cambridge Analytica fame. Very interesting but also disheartening episode about smart people only caring about getting richer. https://www.acquired.fm/episodes/renaissance-technologies https://www.acquired.fm/episodes/renaissance-technologies
- richrichie 2y ago[flagged]
- shrubble 2y agoTo educate a man in mind and not in morals is to educate a menace to society. -- Teddy Roosevelt (I'm speaking generally and not saying that Jim Simon was bad)
- secondcoming 2y agoYou don’t know what people do with their money so how can you claim they lack morals?
- cess11 2y agoIf they get the money in an immoral way, then we can disregard what they do with it afterwards.
- cess11 2y agoThe social mechanic is basically that some people accumulate wealth extracted from the value produced by other people's labour. Is it ethical to use other people in that way? What kind of person can live a life like that?
- 2y ago
- keithalewis 2y agoThere is also this: https://www.reuters.com/business/finance/renaissance-executives-pay-about-7-bln-settle-tax-probe-wsj-2021-09-02/ https://www.reuters.com/business/finance/renaissance-executi.... Fancy-pants maths and platitudes are not needed to make 20-40% returns when you are cheating the government out of taxes.
- cyrillite 2y agoWhy would the feat of generating those returns only count if it was net of tax?
- jjallen 2y agoMaking 60% a year would still be very high after tax. That’s why he accumulated many billions of dollars.
- keithalewis 2y agoIf you don't know exactly how someone made money you can make up any happy story you want.
- jjallen 2y agoWe know exactly how he made his money because there are decades of audited financial statements and a thorough review by the SEC after the Madoff fiasco
- keithalewis 2y agoRoyal We does not know exactly how he made his money. You are making up another Hero Worship happy story. It took until 2021 to settle his tax fraud case inspite of audited financials.
- keithalewis 2y agoThey would be more impressive if he wasn't the biggest tax cheat in US history.
- sashank_1509 2y agoIt still feels very fishy to me that a closed capped fund has insane returns while the public fund that investors can invest in, has lukewarm results (not even beating the market from what I recall). Seems like too many people, especially those that have no experience in the industry bought into the myth that genius mathematicians beat the market etc. The truth is that the market is mostly a zero sum competition between its participants. If RenTech is so good, they should have people that are a class above everyone else. Does someone claim that RenTech has more smart traders than Jane Street, Citadel etc? All of these people hire IMO Gold Medallists etc, and after a point there are diminishing returns on intelligence, someone who won IMO gold is not that much better than someone who got silver in intelligence. Even assuming RenTech got the cream of the cream, only golds while Jane street got the Silvers, I doubt there is enough alpha there for RenTech to have the insane spectacular market performance that they show. But that is likely not the case, they have people of similar caliber to Jane Street, Citadel etc which makes their outsized performance even more intriguing. The only possibilities I can think of, is 1 they are cooking the books, this would be insanely risky but not something unheard of in this industry. 2 they have discovered a few trading strats that they have maintained as a closely guarded secret all these years that allows them to get their edge on the market. Or similarly, some of their founding team are just godlike traders who always beat the market and once they’re gone RenTech will also fall. This feels even more unlikely, considering employee attrition and such but might be possible. For what it’s worth, I’ve had friends that interviewed with RenTech mention to me that it was an okay interview, heavily focused on C++ technical details (especially latest C++11 features and above) but not harder than an equivalent Citadel interview etc.
- logicchains 2y ago> All of these people hire IMO Gold Medallists etc, and after a point there are diminishing returns on intelligence, someone who won IMO gold is not that much better than someone who got silver in intelligence. Being an IMO gold medallist doesn't make someone a good mathematician; there's a very big difference between the kind of math in the IMO and the kind of mathematical research a successful mathematician does. Jim Simons was an extremely successful mathematician, who won a Millenium Prize, and hired mathematicians and physicists with a strong publication history. There's a quote from someone at Rentech like: "We hire the A-grade mathematicians. Other firms hire the B or C-grade mathematicians, and don't even know the A-grade mathematicians exist". It's like, if a startup hired a bunch of fresh CS Olympiad Gold Medalists straight out of university, do you think they'd be able to compete with Google (especially Google of 10 years ago, when its search was still so dominant)?
- clpmsf 2y agoI listened to a talk to that Jim Simons gave at San Francisco State University about a decade ago in which he mostly recounts his life and career. Towards the end when he was describing the state of the fully realized RenTech firm, he mentioned that they collect approximately 7TB of data per day, and that the #1 investment rule is that a human never, under any circumstances, intervenes with what the model (he said "the computer") decides.
- winddude 2y agoWhich in those days was absolutely staggering. But I think they were looking for similar patterns in historical data to current data, not trying to fit current data into a set of predefined patterns or algos from historical data.
- smarm52 2y agoObligatory: The set of investors is huge, some are bound to get lucky. https://en.wikipedia.org/wiki/The_Black_Swan:_The_Impact_of_the_Highly_Improbable https://en.wikipedia.org/wiki/The_Black_Swan:_The_Impact_of_... https://en.wikipedia.org/wiki/Black_swan_theory https://en.wikipedia.org/wiki/Black_swan_theory And, the more money you have, the easier it is to get more; the curve is exponential. Piketty, T. (2014). Capital in the twenty-first century. Harvard University Press.
- JSimonsIsJCrow 2y agoMoney laundering? Tax evasion? Political bribery racket? https://news.ycombinator.com/item?id=40348393 https://news.ycombinator.com/item?id=40348393